Unemployment Was Not Bad – Buy On Support!!!

November 6, 2009
Author: Peter Stolcers, Founder of OneOption

This morning, the much awaited Unemployment Report was released. The jobless rate jumped to 10.2% in October, the highest level since 1983. The Labor Department showed that employers cut 190,000 jobs last month, greater than the 175,000 that was expected. Employment losses for August and September where revised and 91,000 fewer jobs were lost than initially reported. This number is not that bad considering that last month's figure first came in at - 263,000 and the market was able to recover. While this is not a great number, it does show gradual improvement and that is what the market really wants to see. The first time we see job losses increase month-over-month, fears of a double dip recession will topple the market. We are not likely to see that in the next two months and I believe that today’s decline will set up a great buying opportunity into year end. As I have been saying, economic conditions are "less bad". GDP, ISM services, ISM manufacturing and unemployment all showed improvement. Earnings have been solid and guidance has been decent. Interest rates are low and the Fed plans to keep them that way for at least six months. We are heading into seasonal strength and a year-end rally is likely. I am not bullish enough to buy calls, but I am aggressively selling out of the money put spreads on support today. We are likely to see an opening dip and choppy trading. Wait to see if the selling pressure gains traction. During last week's decline, Asset Managers simply pulled bids to see how far the market would drop. I have seen demand return to the market this week and now that a major piece of news has been released, I expect them to be more aggressive. I've been telling you to line up your longs. This will be the day to enter positions once support has been established. The news was pretty decent and recent merger activity (Black & Decker/Stanley Tools, Berkshire Hathaway/Burlington Northern) will keep shorts from getting too aggressive. This will be one of the better opportunities for the remainder of the year.image

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